Month: May 2024

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How to Break into VC in 2024

run, start, running, track and field

Last week, I was chatting with Maya from Spice Capital. And in part of our conversation, she said that the advice she gives to folks looking to break into VC is that they should study late-stage founders, so that they know what excellence and quality looks like.

And I wholeheartedly agree. To get a bit more surgical, for anyone looking to break into VC, study founders who’ve gotten to at least a Series C round. And not only that, if you can, reach out to founders who’ve hit at least Series C, with 8- to 9-figure ARR from EACH set of vintage years. From the bull run of 2020-2021 to the growth periods of 2012-2019 to the GFC to the dot com boom and crash.

If you were to only take one vintage, you have a skewed view of what “great” looks like. But to sample across the eras allows you to pattern match with a greater and less-biased sample size. And instead of focusing on what changed in each era, focus on what hasn’t changed.

To the average person who’s looking to break into VC without a network, aka 99.9% of the world, myself and Maya included when we first did, cold emails and coffee chat asks will only get you so far. In fact, more often than not, you’ll either be ghosted or rejected. So, get creative.

If it helps, here are some ideas that may kindle the fire:

  • Start a podcast. I don’t care if you only have an audience of one. Start it. At some point it’ll grow. But giving people a platform to share their advice is better than having one isolated conversation. After all, that’s how Harry Stebbings started.
  • Or a newsletter or a blog. Vis a vis, Lenny Rachitsky or Packy McCormick. Hell, even a book, like Paige Doherty did. Although the last of which is a lot more work, but tends to be have more evergreen content.
  • Get into investment banking or tech/management consulting. This isn’t new. But if you get the chance to work with pre-IPO companies and take them public, there is immense value in seeing excellence in play.
  • Host events. While I personally like intimate dinners, there is also value from hosting large networking events, fireside chats, and panels. Like Maya, or Jonathan Chang, or David Ongchoco.

I reread PG’s blogpost on the cities and ambition recently thanks to a good friend of mine down in San Diego. And in it, there’s a specific phrase that caught my eye, “the quality of eavesdropping.” A phrase that has since worked its way into my own rotation. If I were to tie the above examples thematically together, it’s that the quality of eavesdropping is really high. At events, and in consulting, you’re around the buzz of talent. And the jazz of inspiration. When tuning into a podcast, one is often multitasking. Driving, exercising, walking, cooking, you name it. And one might say it is one of the best forms of passive learning out there.

Meriam Webster defines eavesdropping as the act of secretly listening to something private. George Loewenstein says one of the triggers to curiosity is access to information known to others. Private information, in other words, information with an element of exclusivity, fits just that. And as such, while doing the above is useful and helpful to you, it is just as helpful to everyone else. To a busy individual, that just might make her attendance worth it.

All that said, know that if you forever look to lagging indicators of success, you will always be one step behind. If not more. As long as you are tracking successful founders, their companies and their key talent (early employees or key executives), there will be others who will out-execute you. Their networks are larger. And stronger. Especially in that regard.

As someone young, or someone new to an industry, your best bet is to take market risk, not execution risk. Another perspective that both Maya and I share. Betting on new markets mean you are starting off at the same start line as everyone else is. If you can’t get home field advantage, play in a field no one’s played in before.

So after doing the above, and learning from the best, draw your conclusions. And graduate to a new market. But also, beware of the potholes pattern recognition creates.

If it may help, at least for me, it’s useful to remember that excellence is everywhere. And someone who is both ambitious and has a track record for fulfilling promises, is bound to go far. For the latter, it’s especially important to fulfill promises to oneself. The more impossible it is to that individual at that point in time, the better. Whether it was to be an Olympian, or asking their high school crush to prom. Or as Aram Verdiyan calls it “distance travelled.“

Photo by Braden Collum on Unsplash

Stay up to date with the weekly cup of cognitive adventures inside venture capital and startups, as well as cataloging the history of tomorrow through the bookmarks of yesterday!

The views expressed on this blogpost are for informational purposes only. None of the views expressed herein constitute legal, investment, business, or tax advice. Any allusions or references to funds or companies are for illustrative purposes only, and should not be relied upon as investment recommendations. Consult a professional investment advisor prior to making any investment decisions.

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DGQ 21: What’s going to get you excited to be at this business in 5 years?

watch, time

This one was inspired by Harry Stebbings’ episode with Dan Siroker that I tuned into earlier this week. In it, Dan describes his most memorable VC meeting, which happened to be with Peter Fenton at Benchmark. Where Peter asks Dan, “Dan, what’s gonna get you excited to be at this business in five years?”

In sum, what are your future motivations going to look like? Nine out of ten times, it’s likely not going to be exactly the same as the one today. And given that it will look differently, can you still stay true to the North Star of this business as you do today? What’s gonna change? What’s gonna stay the same?

For the most part, the people and the problem space are likely to stay the same. The product may look quite different though. And it’s highly likely that in five years, you would have found product-market fit. So, that’s Act I. Is it the advent of the next chapter of what your company could look like that gets you excited? Hell it might be. You can then tackle a bigger problem. A larger market. An adjacent market. Or what Bangaly Kaba calls the adjacent users. For some founders, it’s the market they always wanted to tackle, but couldn’t when they realized their beachhead market must be something else.

While I can’t speak for everyone, here are some of the answers I’ve personally come to like over the years. From either founders or fund managers:

  • There is no other industry that offers the same velocity of learning that this one provides.
  • I want my company’s legacy to outlive my own. And I want to empower the next generation of builders with the resources and the power to solve the greatest needs of our generation.
  • I want to go home and tell my my wife/husband/kids that I lived my fullest life today. And this is what gives me endless joy.
  • Act I was solving a problem I faced. Act II is solving a problem others face in our space.
  • Getting on the phone with a customer and hearing how much our product changed their lives makes me really happy.
  • If I’m not regularly putting the firm’s reputation on the line, we’re not trying hard enough. And I live for that challenge.
  • I want to build a world where people don’t settle for “It is what it is.”
  • No one else is solving the problem I want to solve in the way that I believe it should be solved.
  • I want to continue to be a superhero, a role model, for my daughter/son.

In many ways, it’s quite similar to the question I ask first-time GPs or aspiring GPs about their motivation.

Things in venture exist on long time horizons. For founders, it’s at least 7-9 years before an exit. For fund managers, it’s 10-15 years per fund. And that’s just a single fund. Anything more is longer. So in order to compete against the very best, you need to have long time horizons. You must have the resolve to stay the course. As Kevin Kelly says, “The main thing is to keep the main thing the main thing.”

Along the same vein, there’s also a Jeff Bezos quote I really like: “If everything you do needs to work on a three-year time horizon, then you’re competing against a lot of people. But if you’re willing to invest on a seven-year time horizon, you’re now competing against a fraction of those people… Just by lengthening the time horizon, you can engage in endeavors that you could never otherwise pursue.”

Photo by Luke Chesser on Unsplash

The DGQ series is a series dedicated to my process of question discovery and execution. When curiosity is the why, DGQ is the how. It’s an inside scoop of what goes on in my noggin’. My hope is that it offers some illumination to you, my readers, so you can tackle the world and build relationships with my best tools at your disposal. It also happens to stand for damn good questions, or dumb and garbled questions. I’ll let you decide which it falls under.

Stay up to date with the weekly cup of cognitive adventures inside venture capital and startups, as well as cataloging the history of tomorrow through the bookmarks of yesterday!

The views expressed on this blogpost are for informational purposes only. None of the views expressed herein constitute legal, investment, business, or tax advice. Any allusions or references to funds or companies are for illustrative purposes only, and should not be relied upon as investment recommendations. Consult a professional investment advisor prior to making any investment decisions.

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The Limited Partner Game Show | Beezer Clarkson & Chris Douvos | Superclusters | S2 Post Season Episode

Beezer Clarkson leads Sapphire Partners‘ investments in venture funds domestically and internationally. Beezer began her career in financial services over 20 years ago at Morgan Stanley in its global infrastructure group. Since, she has held various direct and indirect venture investment roles, as well as operational roles in software business development at Hewlett Packard. Prior to joining Sapphire in 2012, Beezer managed the day-to-day operations of the Draper Fisher Jurvetson Global Network, which then had $7 billion under management across 16 venture funds worldwide.

In 2016, Beezer led the launch of OpenLP, an effort to help foster greater understanding in the entrepreneur-to-LP tech ecosystem. Beezer earned a bachelor’s in government from Wesleyan University, where she served on the board of trustees and currently serves as an advisor to the Wesleyan Endowment Investment Committee. She is currently serving on the board of the NVCA and holds an MBA from Harvard Business School.

Chris Douvos founded Ahoy Capital in 2018 to build an intentionally right-sized firm that could pursue investment excellence while prizing a spirit of partnership with all of its constituencies. A pioneering investor in the micro-VC movement, Chris has been a fixture in venture capital for nearly two decades. Prior to Ahoy Capital, Chris spearheaded investment efforts at Venture Investment Associates, and The Investment Fund for Foundations. He learned the craft of illiquid investing at Princeton University’s endowment. Chris earned his B.A. with Distinction from Yale College in 1994 and an M.B.A. from Yale School of Management in 2001.

You can find Chris and Beezer on their socials here.

Connect with Beezer here:
Twitter: https://twitter.com/beezer232
LinkedIn: https://www.linkedin.com/in/elizabethclarkson/

Connect with Chris here:
Twitter: https://twitter.com/cdouvos
LinkedIn: https://www.linkedin.com/in/chrisdouvos/

And huge thanks to this episode’s sponsor, Alchemist Accelerator: https://alchemistaccelerator.com/superclusters

Listen to the episode on Apple Podcasts and Spotify. You can also watch the episode on YouTube here.

Brought to you by Alchemist Accelerator.

OUTLINE:

[00:00] Intro
[03:07] Beezer’s childhood dream
[04:29] How Chris was let go from his $4.15 job at Yale
[08:09] Concentrated vs diversified portfolios
[09:30] First fund that Beezer and Chris invested
[11:42] Funds that CD and Beezer passed on and regret
[16:07] Favorite term in the LPA? Or not?
[19:18] What piece of advice did a GP in their portfolio share with them?
[23:15] What’s something that Beezer/CD said to a GP that they regret saying?
[28:06] What’s the most interesting fund model they’ve seen to date?
[33:20] What fund invested in 2020-2021 inflated valuations that they’ve reupped on?
[40:18] Events that they went to once but never again
[44:24] Life lessons from CD & Beezer
[54:02] The founding story of Open LP
[55:02] Thank you to Alchemist Accelerator for sponsoring!
[57:58] If you learned something new in this episode, it would mean a lot if you could drop a like, comment or share it with your friends!

SELECT LINKS FROM THIS EPISODE:

SELECT QUOTES FROM THIS EPISODE:

“If you’re overly concentrated, you better be damn good at your job ‘cause you just raised the bar too high.” – Beezer Clarkson

“Conviction drives concentration, and that you should be so concentrated as to be uncomfortable because otherwise you’re de-worsified, not diversified.” – Chris Douvos

“[David Marquardt] said, ‘You know what? You’re a well-trained institutional investor. And your decision was precisely right and exactly wrong.’ And sometimes that happens. In this business, sometimes good decisions have bad outcomes and bad decisions have good outcomes.” – Chris Douvos

“Sometimes I treat GPs like I treat my teenage children which is: Every word out of a teenager’s mouth is probably a lie designed to make them look better or to hide some malfeasance.” – Chris Douvos

“May we be blessed by a weak benchmark.” – David Swensen

“Miller Motorcars doesn’t accept relative performance for least payments on your Lamborghini.” – Chris Douvos (citing hedge fund managers)

“At the end of the day, the return on an asset is a function of the price you paid for it and the capital it consumes.” – Chris Douvos

Follow David Zhou for more Superclusters content:
For podcast show notes: https://cupofzhou.com/superclusters
Follow David Zhou’s blog: https://cupofzhou.com
Follow Superclusters on Twitter: https://twitter.com/SuperclustersLP
Follow Superclusters on TikTok: https://www.tiktok.com/@super.clusters
Follow Superclusters on Instagram: https://instagram.com/super.clusters

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Telltale Signs of When Risk is High

jenga, risky

At the end of last week, an LP told me something quite provocative. That right now in 2024, we’re in a low-risk environment.

And in all fairness, I thought he was completely bonkers. Fear is high. Investments have slowed their pace, especially in the private markets. Markets have really yet to recover. Some believe we’ve hit the bottom and will bounce around the bottom a few times. Others think we’ve yet to see the worst of it. Hell, just yesterday, Eric Bahn tweeted the below:

Wars are raging across the world. Currency is fluctuating on a global scale. Hell, even for the average person, prices are going up at a rate unfamiliar to most people’s memory.

But his next line really made me pause. “You’re right. There’s geopolitical risk, currency risk, market risk, and valuation/pricing risk. And we can identify every single one of them. In fact, the actual risk of investing today is really low, but the perceived risk is really high. Risk is highest when you can’t tell what the risk is. That was 2020 and 2021, when you couldn’t put a finger on what kinds of risk were out there.”

And that really stuck with me. To underscore again, risk is highest when you can’t tell what the risk is.

And so paved way for this blogpost. Albeit, that last line was the punchline.

He later told me that the concept wasn’t original, but that its origin traces its way back to Ken Moelis. Regardless of the attribution, it’s worth doing a double take on.

There’s that famous Peter Drucker line, “You can’t manage what you don’t measure.” And in many ways, it is just as true for risk as it is for tasks and KPIs and OKRs.

The family office for a well-known luxury brand once told me that they like to pay the complexity premium on esoteric alternatives. To them, venture is one of those esoteric alternatives. In addition, they’re also happy to overpay during bull markets. Access to a volatile and nascent asset class, to them, deserves a premium.

But taking a step back, there may be more wisdom to it than I initially thought. In bear markets, when the risk is real and discrete, there is no complexity premium to pay. After all, you can begin to manage what you do measure. On the flip side, in a bull market, where no one really knows who will win or what the macro risks are, a premium can be and often is paid as a bet on a company’s future and insurance against a margin of error that is hard to define.

Of course, one can say that the premium is often hype-driven instead of risk-driven. But really, hype is just long-term risk donned with a new set of clothes. A short-term luxury with a buy-now-pay-later tag that comes in quarterly installments of belt-tightening and regret.

While I personally have always believed that as an investor it’s better to be disciplined and to “dollar cost average” across vintages vis a vis time diversification, there are several great investors who believe price is a trap. At the top of my head, Peter Fenton and Keith Rabois. The latter shared his thoughts earlier this year on why. At least for seed and Series A. That in summary, there is no limit on how much you pay for a great company at the seed and Series A (likely the pre-seed as well) that won’t return you multiple-fold back. And that debates on price really are leading indicators on conviction or lack thereof.

The last part of which I agree to an extent.

All that to say, I think a useful exercise to go through whenever making a major (investment) decision is to take out a notepad and write down all the risks you can think of. If you can think of it, you can probably find a way to hedge against it. On the flip side, if you’re about to make a decision and you can’t think of any risks, that’s probably the biggest risk you’ll take.

As my mom told me since I was a kid, “There’s no such thing as a free lunch.”

But if you do come up with a good list, and the world around you is still scared, and you think there might be something special in the opportunity in front of you, sometimes it pays to be bullish when others are bearish.

Photo by Naveen Kumar on Unsplash

Stay up to date with the weekly cup of cognitive adventures inside venture capital and startups, as well as cataloging the history of tomorrow through the bookmarks of yesterday!

The views expressed on this blogpost are for informational purposes only. None of the views expressed herein constitute legal, investment, business, or tax advice. Any allusions or references to funds or companies are for illustrative purposes only, and should not be relied upon as investment recommendations. Consult a professional investment advisor prior to making any investment decisions.

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A Jerk’s Guide to Being Kind

dog, bully, fight

First off, my lizard brain that optimizes for immediate gratification thought “A Jerk’s Guide to Being Kind” would be a fun title. Clickbait-y (kinda). Great for SEO. So I used that as my prompt for this public journal entry. 🙂

So, if you didn’t come for a public apology and how I say no, I’ll see you in next week’s blogpost.

Secondly, I was reading Chris Neumann’s blogpost this week, aptly named “The Beginner VC’s Guide to Not Being a Jerk.” And realized, holy frick, I’m a jerk. In it, he describes five things that VCs do that come off as jerkish.

  1. Don’t Use Possessive Adjectives
  2. Don’t Multitask When a Founder is Pitching
  3. Don’t Badmouth Founders
  4. Don’t Mansplain
  5. Don’t Ghost Founders

And of the five above, I know I’m an offender of three of the above. Using possessive adjectives. Multitasking. Ghosting. Probably in that order from most frequent to least frequent. (Sorry, Chris. Sorry to founders I’ve done this to.) The first two I don’t do intentionally, nor do I do the either of them often.

Not sure if it makes too much of a difference, but rather than say “my company” or “our companies,” I do say “our portfolio companies.” Just with one extra word in there. Occasionally, will let it slip when I’m trying to shorten the sentence I’m saying.

I know I’m more prone to multi-task when I’m not the only investor in the room, and definitely when I’m not the primary investor. Again, don’t do it often, but it happens. And I never do so when I’m the only other person in that conversation. 99% of the time I do let the founders and GPs I talk to know that I’m just taking notes of our conversation. Personally don’t use the AI notetakers, but that’s a discussion for another day.

And ghosting. My goal is to get to inbox zero every day. And I really do my best not to ghost. But three things will always happen:

  1. Some email or text always ends up slipping through my inbox. Either it goes in spam, or during certain days, I’m bombarded with hundreds of emails and it slips through the cracks. And I do give every founder and GP who pitch me the right to re-surface past emails if it does slip through.
  2. If the email or message seems like it came out of an automation or mail merge AND I’m not interested, I do let it drop. I read EVERY email for sure. But if that email looks like the same one that you send to every investor, those have been going straight into the archives more and more. That also means that some emails just read like it’s an automated email even if it doesn’t, and it slips through.
  3. There’s a shortlist of people who have abused my old personal policy of responding to every email I get. And so for those people, I’m not sorry if I do ghost you. That said, it’s a pretty short list of people (probably 30-40 people as of now).

And lastly, well, I’ve made founders pitching me cry. Not something to brag about. But in sharing what I thought was honest feedback, I made tears flow.

So, in summary, I’m probably a jerk.

In my mind, a jerk is someone who prioritizes their own beliefs and priorities to the point that they either intentionally ignore or severely de-prioritize others’. Although I try my best not to ignore what other might want or need, but I do often prioritize my own. So to add on to all the above, I’m sharing some situations where my jerkiness comes out and what I say in those moments.

When having tough conversations

I actually learned this while listening to Lenny’s podcast with Matt Mochary. When I need to let someone go. When I need to call a friend out on their bad behavior. Or when my partner and I get into a fight. “Preface hard conversations with: This is going to be a difficult conversation. Are you ready?”

In addition, I also preface with how long I think the discussion will take. “May I have thirty minutes of your undivided attention?” And what the topic will be on. No point in blindsiding the other person.

It helps set the stage. And if the other person needs more time, they have the option to back out. Moreover, all tough conversations are 1:1 conversations. At least for me, even if it relates to many, I start notifying them all on a 1:1 basis.

When trying to leave a conversation at an event

This one also isn’t original. I learnt from a friend of mine who is far more eloquent than I am. Not all conversations at events are created equal. And sometimes, at an event, especially a networking event, my goal is to say hi to the event host or to talk to someone else on the floor. And in between, I may find myself in another serendipitous. Case in point, yesterday, I ended up meeting a founder who sold his last company for $500M exit to a large Fortune 50 company in the parking lot and who was figuring out his next thing. Serendipitous. And super fun, but I was going to be royally late for another event if I stayed chatting in the parking lot.

So, when I need to leave a conversation, instead of excusing myself to go to the bathroom or get more food, I’ve learned to say, “I’d love to ask you one last thing that I’d beat myself up tonight if I didn’t ask before I need to go say hi to XXX.”

One, it timeboxes the next few minutes of the conversation. Two, I’m still interested in the individual and I want them to get the last word before I head out.

For 1:1 conversations

I usually let people know at the very beginning of the conversation that I have a “hard stop” at a specific time. Which 90% of the time is true. Usually another meeting. Or I have just way too much work on my plate that I need to get to.

When turning down a meeting (for now)

I wish I had more time in a day to talk to awesome people. I also wish I had more energy in a day to talk to awesome people. But unfortunately, I only have 24 hours in a day. And well, I’m an introvert. As in, I enjoy writing this blogpost you’re reading right now since 5AM in the morning than telling someone in a live conversation what I will end up writing here.

As such, if I’m interested in meeting at some point, I usually say something to the tune of: “I would love to meet, but if I do so within the next XXX weeks / months, I would have failed in my promise to the people I care about. So if you’ll allow me to be a good friend / family member / supporter of my existing projects and investments, could we revisit this in YYY weeks / months?”

Other times to save everyone’s time, since I won’t find my interest levels gravitating towards said topic, I let people know it just isn’t of interest to me in the foreseeable future, and that their luck may be better elsewhere.

When turning down an investment opportunity

This is actually something that was inspired by one of Jason Calacanis’ podcast episodes. And while there are many things I may not agree with him on, I really like the phrasing he uses to turn down founders who push back against his investment decision. And I’ve added some lines that best fit the way I talk. Which I also included this in my 99 series for investors.

“I always have to accept the possibility that I’m making a mistake. The venture business keeps me humble, but these are the benchmarks that the team and I all believe in.”

In closing

Sometimes I think it’s inevitable to appear as a jerk to some people out there. While one can try to reduce the splash damage, the truth is sometimes what you have to say may not be what the other person wants to hear or see. But as long as you hold yourself to a high degree of integrity and do so in as kind of a way as you can, I think that’s all that really matters.

Often times, I do believe it’s more important to be kind than nice. I hope the above helps.

Photo by David Taffet on Unsplash

Stay up to date with the weekly cup of cognitive adventures inside venture capital and startups, as well as cataloging the history of tomorrow through the bookmarks of yesterday!

The views expressed on this blogpost are for informational purposes only. None of the views expressed herein constitute legal, investment, business, or tax advice. Any allusions or references to funds or companies are for illustrative purposes only, and should not be relied upon as investment recommendations. Consult a professional investment advisor prior to making any investment decisions.

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Qualitative Signals to Look for in Emerging GPs | Jaclyn Freeman Hester | Superclusters | S2E9

Jaclyn Freeman Hester is a Partner at Foundry. She joined in 2016 with a passion for supporting the next generation of entrepreneurs and investors. Jaclyn leads direct investments in early-stage companies, often collaborating with Foundry’s partner funds. She loves working closely with founders to solve hard problems and think about the human elements of business. She invests across B2B and consumer companies that exhibit strong end-user empathy and use technology to empower individuals, unlock potential, and improve experiences.

Jaclyn helped launch Foundry’s partner fund strategy, building the portfolio to nearly 50 managers. Bringing her unique GP + LP perspective, Jaclyn has become a go-to sounding board for emerging VCs.

Jaclyn first fell in love with entrepreneurship while earning her JD/MBA at CU Boulder (Go Buffs!). There, she served as Executive Director of Startup Colorado, where she got to know Foundry and the incredible Boulder/Denver startup community the firm helped catalyze. In her brief stint as a practicing attorney, Jaclyn advised clients in M&A transactions and early-stage financings. She also witnessed the founder journey first-hand, working closely with her husband and his family as they built a B2B SaaS company, FareHarbor (acquired by BKNG).

Jaclyn loves the Boulder lifestyle, but her heart will always be on the East Coast, having grown up a New England “beach kid.” She is the proud mother of three humans and three dogs and is a blue-groomer-on-a-sunny-day skier and 9-hole golfer. In her glimpses of free time, you can find Jaclyn enjoying live music, especially at Red Rocks and in Telluride, two of the most magical places in the world.

You can find Jaclyn on her socials here:
Twitter: https://twitter.com/jfreester
LinkedIn: https://www.linkedin.com/in/jaclyn-freeman-hester-70621126/

And huge thanks to this episode’s sponsor, Alchemist Accelerator: https://alchemistaccelerator.com/superclusters

Listen to the episode on Apple Podcasts and Spotify. You can also watch the episode on YouTube here.

Brought to you by Alchemist Accelerator.

OUTLINE:

[00:00] Intro
[03:24] The significance of Kara Nortman in Jaclyn’s life
[13:59] Lesson on recognizing effort from Dan Scheinman, Board Member at Zoom
[18:27] The question to disarm GPs learned from Jonathon Triest at Ludlow Ventures
[23:37] The differences between being a board member and an LPAC member
[32:04] Turnover within institutional LPs
[33:58] The telltale signs of team risk in a partnership
[41:25] How to answer “How do you fire your partner?”
[44:05] Foundry’s portfolio construction
[53:22] What makes Lan Xuezhao at Basis Set so special?
[59:59] What does Shark Tank get right about venture?
[1:03:37] Jaclyn’s Gorilla Glue story
[1:05:51] What keeps Jaclyn humble today?
[1:12:11] What will Jaclyn do after Foundry’s last fund?
[1:16:28] Jaclyn’s closing thought for LPs
[1:18:10] Thank you to Alchemist Accelerator for sponsoring!
[1:20:46] If you enjoyed this episode, a like, a comment, a share will go a long way!

SELECT LINKS FROM THIS EPISODE:

SELECT QUOTES FROM THIS EPISODE:

“By the time track record is established, it’s almost too late.” – Jaclyn Freeman Hester

Follow David Zhou for more Superclusters content:
For podcast show notes: https://cupofzhou.com/superclusters
Follow David Zhou’s blog: https://cupofzhou.com
Follow Superclusters on Twitter: https://twitter.com/SuperclustersLP
Follow Superclusters on TikTok: https://www.tiktok.com/@super.clusters
Follow Superclusters on Instagram: https://instagram.com/super.clusters

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#unfiltered #87 Shower Thoughts on Great Founders and Great Investors

expo, markers, whiteboard

I’ve been doing some thinking as of late in and out of the shower. In conversations. In reexamining my own investment thesis. And changing it as a function of scar tissue and tears of joy. As such, sharing a few shower thoughts below that for the below, might be better described as a tweet than in a long-form blogpost.

About founders

  1. A community or 1000 true fans built without big brands and logos is far more impressive than a community built by leveraging someone else’s brands.
  2. 20 years of experience is more impressive than 20 one-year experiences for deeply technical problems.
  3. 20 one-year experiences is more impressive than 20 years of experience for cultural (consumer) problems.
  4. Great founders don’t delegate understanding. Senior execs aren’t hired until founders themselves prove out the playbook.
  5. In the age of AI, new information is more valuable than remixes of old. Standing out is more important than fitting in. The latter of which will be replaced with by AI given the wealth of data out there. (Ironically, this line is inspired by old conversations plus Sriram Krishnan’s blogpost)
  6. Revenue matters more than traffic for consumer products since AI bots can now mimic simple digital human behavior.
  7. Silicon Valley / SF Bay Area is strong because of the high quality of eavesdropping. There are so many ideas being thrown around in coffee shops. It’s quite easy to stumble across a world-class lesson without paying $2000 for a conference ticket. Things sure have changed since ’08.

About investors

  1. In early stage venture, debates on price is a lagging indicator of conviction, or more so, lack thereof.
    • Price also matters a lot more for big funds than small funds.
    • Price also matters more for Series B+ funds.
    • Will caveat that there’s an ocean of difference between $10M and $25M valuation. But it’s semantics between $10M and $12M valuation. How big your slice of the pie is doesn’t matter if the pie doesn’t grow.
    • Not saying that it’s correlated, but it does remind me of a Kissinger quote: “The reason that university politics is so vicious is because stakes are so small.”
  2. The reasons Fund I’s and II’s outperform are likely:
    • Chips on shoulders mean they hustle more to find the best deals. They have to search where big funds aren’t or come in sooner than big funds do.
    • Small fund size is easier to return than a larger fund size.
    • Rarely do they have ownership targets (nor do they need significant ownership to return the fund). Meaning they’re collaborative and friendly on the cap table, aka with most other investors, especially big lead investors.
    • Price matters less. Big funds really have to play the price game a little bit more since (1) likely to be investing in multiple stages with reserves, and price matters more past the Series A than before, and (2) they’re constrained by check size, ownership targets, and therefore price in order to still have a fund returner.
  3. “Judge me on how good my good ideas are, not how bad my bad ideas are.” — Ben Affleck when writing Good Will Hunting. A lot of being a VC is like that. Hell, a lot of being a founder is like that.
  4. We like to cite the power law a lot. Where 20% of our investments account for 80% of our returns. But if we were to apply that line of thinking two more times. Aka 4% (20 x 20%) of our investments account for 64% of our returns. Then 0.8% account for 51.2% of our returns. If you really think about it, if you invest in 100 companies, we see in a lot of great portfolios where a single investment return more than 50% of the historical returns.

Photo by Mark Rabe on Unsplash

#unfiltered is a series where I share my raw thoughts and unfiltered commentary about anything and everything. It’s not designed to go down smoothly like the best cup of cappuccino you’ve ever had (although here‘s where I found mine), more like the lonely coffee bean still struggling to find its identity (which also may one day find its way into a more thesis-driven blogpost). Who knows? The possibilities are endless.

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The views expressed on this blogpost are for informational purposes only. None of the views expressed herein constitute legal, investment, business, or tax advice. Any allusions or references to funds or companies are for illustrative purposes only, and should not be relied upon as investment recommendations. Consult a professional investment advisor prior to making any investment decisions.

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